American Surety Co. of New York v. Lewis State Bank
| Decision Date | 29 April 1932 |
| Docket Number | No. 6398.,6398. |
| Parties | AMERICAN SURETY CO. OF NEW YORK v. LEWIS STATE BANK. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Stuart Mackenzie, of Miami, Fla., for appellant.
Joe A. Edmondson, W. J. Oven, and C. L. Waller, all of Tallahassee, Fla., for appellee.
Before BRYAN, FOSTER and HUTCHESON, Circuit Judges.
Section 1903 of the Compiled General Laws of Florida 1927, provides for the creation of the department of game and fresh water fish, and the office of state game commissioner, who shall be an appointee of the Governor and whose duty it is to enforce the game laws of Florida. It is provided that he shall give bond in the sum of $10,000 for the faithful performance of his duties; that he shall have authority to appoint deputies and other assistants; and that all accounts, claims, and bills of any nature against the department shall be examined by the state game commissioner, and, if found correct, shall be approved and delivered to the comptroller, who shall issue a warrant drawn on the state treasury against such fund to pay such accounts, bills, or claims. By section 1912, it is provided that the Governor shall require an audit of the commissioner's office and accounts to be made at least once during the fiscal year, and the commissioner shall make a yearly written report to the Governor as to the administration of his department.
In 1927, J. B. Royall was appointed commissioner. He executed a bond as required by the statute with the American Surety Company as surety. Thereafter, among other bills and accounts which he approved for payment by the comptroller, he approved 198 warrants to various named payees, aggregating $19,800, all of which were paid by the Lewis State Bank, the depository of the funds of the department of game and fresh water fish of the state of Florida. The state asserting that these warrants had been fraudulently procured to be issued in the name of fictitious payees, and fraudulently presented for collection and collected by Royall, demanded that the surety company pay to the state the full penalty of the bond. This the company did, taking a subrogation agreement pro tanto the amount paid on the bond, to all actions which the state of Florida had against Royall or any other person answerable to the said Royall or to the state of Florida. It then brought this suit to enforce that subrogation, alleging the facts substantially as above. It further alleged that while it was the duty of the defendant bank to pay warrants drawn against the funds of the game and fish department by the comptroller of the state of Florida to the payees named in such warrants, and presented or properly endorsed for payment by such payees, it was its duty not to pay out the funds except to genuine and authentic payees and upon genuine and authentic indorsements. That Royall, the principal in the bond, had "fraudulently and with intent to embezzle the funds of the State of Florida, especially those maintained in the defendant bank, presented to the Comptroller payrolls containing the names of fictitious persons and induced the Comptroller to issue warrants drawn to the order of such fictitious persons and deliver the same to him." It further alleged that each of the 198 warrants had been indorsed in the name of a fictitious payee and presented by Royall to the bank, and the amounts thereof had been by the bank paid to him, in violation of its duty, as custodian of the funds, to ascertain that the same were drawn to fictitious persons and that they were fictitiously indorsed.
Defendant's motion to dismiss the bill for want of equity was sustained upon the expressed views that the bill showed no equity in plaintiff, and that the bank being innocent of any fraud or wrong dealing would not be liable to the state because of the failure of the state to advise it of the fraud being committed. From the judgment dismissing the bill, this appeal is prosecuted.
In addition to many grounds urged in support of its contention that the judgment was right on its merits, appellee urges here that the appeal should be dismissed for want of jurisdiction in the District Court. The point made is that plaintiff's suit is one in the right of its assignor, the state of Florida, which could not have maintained the suit in the federal court, and therefore it is one cognizance of which is, by section 41, 28 USCA, Judicial Code, § 24, denied the District Court. We think this contention is without merit. The cause of action asserted...
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